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The following article
was written by Coleman Patterson and
appeared in the Business section of the Abilene Reporter-News.
There is more to setting up a shop than a good product, March 10,
You have just come up with THE
perfect business ideaa product or service that you think countless people will want
and demand. It is time to get a business
banking account and lease a building, right? Not
Businesses exist to conduct exchanges
with others. Individuals and organizations
outside of the firm exchange their resources for the products and/or services of the
business. Without those exchanges, businesses
will be unable to cover costs and meet expenses and will eventually go out of business.
The product or service that a firm offers
is critically important in creating exchanges, but equally important are the prices that
the firm charges, the ways that consumers are made aware of and encouraged to trade with
the firm, and where and how to get the product or service to the consumer. In marketing, those ideas are known as the
marketing mixproduct, price, promotion, and place.
A good product or service satisfies needs
or wants. Necessity goods and services meet
basic human needs (e.g., food, clothing, shelter, medical service, etc.). Luxury goods and services go beyond basic needs. An expensive dinner at a fine restaurant satisfies
basic hunger needs, but might also satisfy self-esteem and ego needs. Because there is usually a premium paid for
luxuries, their demand is typically affected more by price changes than necessities.
There is no magic formula used to
determine prices. Lower prices create more
demand than higher prices, but the profits gained from each sale are also lower. A higher price might bring in greater profit on
items sold, but fewer consumers will be willing and/or able to pay higher prices. The trick is to find a price that is low enough to
generate demand, but high enough to cover costs and provide enough profit to make the
If no one knows that your firm exists or
what you offer, you may as well not exist. Advertising
and promotional activities are needed to create exchanges with consumers. It is important that consumers recognize your firm
as the place to fill needs and wants. Incentives
and promotions should be used to introduce, remind, encourage, and compel consumers to
trade with your firm.
Exchanges with consumers need to occur in
places and at times that are convenient for them. Care
should be taken when choosing locations for sales, service, and supply outlets and setting
times of operation. Visibility, convenience
of location, and proximity to target markets should all be considered when choosing a
location. For firms that distribute their
offerings across a wide geographical area, locations with access to proper distribution
systems should be selected.
To succeed in your venture you must offer
a desirable product or service, make consumers aware of your offerings, supply consumers
at the times and places they require, and charge prices that are deemed attractive, yet
profitable. So before running out a setting
up a business, spend the time and resources needed to thoroughly evaluate all aspects of
the marketing mix.
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